The Delhi High Court granted Writ Petition for Defreezing Bank Account as there was no Violation of FEMA (Foreign Exchange Management Act), 1999 or Customs Act, 1962 during the Export of Proceeds Transaction.
Here the Petitioner, Innovative Crafts is a sole proprietorship firm, engaged in the export of handicrafts. During the period 08.12.2014 to 13.12.2014, petitioner had exported 24 consignments of brass, copper and iron handicrafts to foreign buyer M/s. Metal Masters, UAE.
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Petitioner availed duty drawback on the export of aforesaid 24 consignments. The drawback of Rs. 89,77,007/- was assessed and duly allowed to be credited to the petitioner’s bank. On the basis of information received from IndusInd Bank, Moradabad Branch that the petitioner had multiple receipts in their bank accounts, which were claimed to be the duty drawback receipts, an enquiry was conducted and as a consequence of the same, the bank account of the petitioner was frozen by the Department.
During enquiry, it was revealed that the exports were affected by the petitioner, having claimed to have purchased the exported goods from another firm named M/s. Maxwell Impex, which on enquiry, was found to be non-existent. Further, it was noticed that the export proceeds against the subject exports was not from consignees but from third parties.
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Show Cause Notice (SCN) was issued to the Petitioner for the recovery of drawback availed amount of Rs. 79,45,653/- in terms of Rule 16/16A of the Customs, Central Excise Duties & Service Tax Drawback Rules, 1995 read with Section 76(1)(b) of the Customs Act, 1962 [“Act”] along with interest as applicable under Section 75A(2) read with Section 28AA of the Act, which was confirmed by the Additional Commissioner of Customs via Order-in-Original dated 31.01.2018. Penalty of Rs. 1,50,00,000/- was also imposed on the petitioner under Section 114AA of the Act.
Aggrieved by the order, the petitioner filed an appeal before the Commissioner (Appeals), which was rejected. The Revision application also came to be dismissed via order passed by the Additional Secretary to the Government of India. Following which the present writ petition was filed by the Petitioner.
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Mr. Akhil Krishna Maggu, Mr. Vikas Sareen, Ms. Maninder Kaur & Ms. Oshin Maggu & Mr. Ruchir Baswal Advocates Counsel appearing for the Petitioner submitted that the Goods were exported in accordance with law and no provisions of Customs Act were violated. Also claimed that the Petitioner had made appropriate declaration at time of export, and that is the reason for which the goods were allowed to be exported and “Let Export Order” [“LEO”] was granted by the Customs Department.
No objection in respect of quality, quantity and weight were ever raised by the Customs and the entire export consignment was found as per declaration made by the petitioner, the counsel submitted. It is also submitted that every single penny of foreign exchange has been received by the petitioner and DGFT has issued all the BRCs of the petitioner. Further submitted that the order was passed arbitrarily and without application of mind and is liable to be quashed and set aside.
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In contrary Mr. Sunil Kumar Pandey, SPC with Ms. Neha Yadav, Adv. for R-1. Mr. Aditya Singla, SSC with Ms. Saakshi Garg & Mr. Raghav Bakshi, Advocates appearing for the Revenue submitted that the money, said to have been received as export proceeds, was not from the consignee but from a third party, which was not mentioned as ‘Notifier’ before the Customs Authority at the time of filing of shipping bills.
It is further submitted that the amount of US$ 121886,60 out of total proceeds of US$ 1125500.64 had been received from the consignee M/s. Metal Masters while the rest of the payment was received from three other entities which were not notified as third parties in the export documents. Also submitted that neither the petitioner nor the bank submitted any documents in support of the third party payments and the entity from whom the export goods were purchased and was non-existent.
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In rebuttal of which the counsel submitted that RBI Master Circular No.14/2014-15 permits third party payments for export transactions subject to certain conditions specified in B-2(v) of the said Circular.
The Petitioner also submitted that petitioner had submitted a copy of Tripartite Agreement dated 05.10.2014, which was signed between the petitioner and buyer M/s. Metal Masters, as per which, petitioner was to receive payments from M/s. Bright View General Trading LLC, UAE, M/s. Radya Baqer Trading LLC, UAE, Galaxy Impex HK Ltd., Hong Kong and Allied Trend (HK) Trading Ltd., Hong Kong and the copy of the said Tripartite Agreement was submitted at the Office of the Customs Department and also with the banker of the petitioner i.e. Kotak Mahindra Bank Ltd.
It was argued that the petitioner is entitled to the grant of duty drawback, as the entire export proceeds were realized within the stipulated period from the date of export, as evidenced by the e-BRCs.
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In Analysis of the Section 75(1) of the Customs Act, 1962 states that the drawback shall not be allowed in case the sale proceeds in respect of the exports are not received in India within the time allowed under Foreign Exchange Management Act, [“FEMA”] 1999. However, RBI Master Circular No. 14/2013-14 permits the receipt of foreign remittances from an entity other than consignee of the exported goods subject to the conditions prescribed therein.
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